The Renaissance of Single-Stock Concentration Risk Management

Whether the result of equity-based compensation from employment at public companies, or the
rewards of a liquidity event borne of entrepreneurial success, concentrated single-stock positions
are relatively common among wealthy individuals. Clients often wish to maintain ownership of
some or all of their highly appreciated stock for a variety of reasons, such as tax and estate
planning considerations, emotional attachment to the stock and restrictions on the shares. With
the stock market at record heights, interest rates steadily ratcheting up, risks seemingly
everywhere and the possibility of tax reform in the air, single-stock risk management has taken
on a renewed focus. Ideally, such investors would like to:

• Preserve their unrealized gains at an affordable cost
• Retain all future price appreciation and dividends
• Defer the capital gains tax, and avoid other adverse tax outcomes
• Potentially eliminate the capital gains tax through a step-up in tax-cost-basis at death
• Avoid a reportable event for securities law purposes (if a company insider)

Thomas Boczar and Nichal Pai will review a variety of tools and techniques -- some
old, some new, some obvious, some not-so-obvious -- that financial advisors and their clients
might avail themselves of in order to achieve these objectives, including a new risk management
solution, called the Stock Protection Fund, for investors seeking to reduce their downside risk
over a long-term period, without capping their upside or triggering a reportable event.